Regulatory Violations

October 5, 2018

Ameriprise Financial Services agreed to pay $375,000 to New Jersey to resolve an investigation that Ameriprise sold unsuitable non-traded real estate investment trusts (REITs) and non-traded business development companies (BDCs) to customers, did not reasonably supervise the sale of these alternative investments, and did not keep required books and records.  Most of the alternative investment offerings sold by Ameriprise during the relevant time period were registered with the New Jersey Bureau of Securities as conditioned upon heightened suitability standards for sales to New Jersey residents, but Ameriprise had failed to meet the New Jersey Prospectus Suitability Standards.  NJ

October 3, 2018

The SEC froze the assets of U.K. citizen Roger Knox and the Swiss-based company Wintercap SA based on their role in a scheme that generated more than $165 million of illegal sales of stock in at least 50 microcap companies.  The parties are alleged to have helped securities holders conceal their stock ownership and to have provided anonymous access to brokerage accounts to sell the shares in the U.S. market. Knox allegedly helped facilitate pump-and-dump and other market manipulation schemes by selling massive quantities of microcap securities on behalf of the concealed shareholders, and simultaneously orchestrating promotional campaigns and other efforts to artificially inflate the price and trading volume of those shares.  DOJ announced parallel civil and criminal proceedings.  SEC; DOJ

August 20, 2018

Merrill Lynch, Pierce, Fenner & Smith has agreed to pay $8.9 million to resolve claims that it violated the anti-fraud provisions of the Investment Advisers Act by failing to disclose its conflicts of interests to clients. According to the SEC, the violation occurred when Merrill Lynch failed to go through with a planned vote on whether to stop offering certain products managed by a third party, and then failed to disclose to clients that this decision was due to its own business interests. SEC

July 30, 2018

The CFTC ordered Chicago-based R.J. O’Brien & Associates (“RJO”) to pay a $600,000 civil penalty in connection with the company’s failure to detect its client’s post-execution trade allocation scheme. As a registrant, RJO had a duty to monitor the relevant transactions for suspicious activity, but failed to adequately do so, according to the Commission. As a result, the scheme went undetected, and the client was able to allocate profitable trades to specific accounts, sending less profitable trades to the customer or Pool accounts. CFTC

July 19, 2018

A federal court in Washington, DC has ordered two Irish companies, Intrade the Prediction Market Limited and Trade Exchange Network, to pay $3M in penalties relating to the two companies permitting US customers to trade over 5,000 binary options on off-exchange options platforms, as outlawed by the CFTC. Trade Exchange Network was also in violation of a 2005 cease and desist order issued by the CFTC. CFTC

July 18, 2018

The SEC has charged Temenous Advisory, a Connecticut-based investing advisory firm, of putting $19M investor money into high-risk investments and also receiving high commissions from those investments. The misled senior citizens and individuals approaching retirement into buying stakes in four risk, illiquid private offerings. SEC

June 29, 2018

The SEC announced that Morgan Stanley Smith Barney (MSSB) has agreed to pay a $3.6 million penalty and to accept certain undertakings for its failure to protect against its personnel misusing or misappropriating funds from client accounts. According to the SEC’s order, MSSB’s insufficient policies and procedures contributed to its failure to detect or prevent one of its advisory representatives, Barry F. Connell, from misusing or misappropriating approximately $7 million out of four advisory clients’ accounts in approximately 110 unauthorized transactions occurring over a period of nearly a year. SEC

July 2, 2018

The CFTC filed a civil enforcement action in the U.S. District Court for the Eastern District of New York, charging Harris Bruce Landgarten of Old Brookville, New York, with defrauding participants in a commodity pool that he operated, the Tradeanedge Members Fund (TMF). The CFTC Complaint also charges Landgarten with providing his pool participants false account statements and with commingling pool funds with non-pool funds. Further, Landgarten was also charged with one count of obstructing the CFTC’s investigation related to Landgarten’s communications with one of his pool participants, who was a potential witness, while the CFTC’s investigation that resulted in the filing of this enforcement action was pending. CFTC

June 13, 2018

Jamal Y. Vance and his company All City Investments, LLC will pay over $770,000 for fraudulently soliciting customers for forex trading and failing to register as a Commodity Trading Advisor. According to the Consent Order, Vance induced customers using false and misleading data on All City’s website, including a trading track record and purported testimonials. CFTC

June 12, 2018

Merrill Lynch, Pierce, Fenner & Smith Inc. has agreed to pay over $15 million to resolve allegations that its traders and salespersons overcharged Merrill Lynch customers for Residential Mortgage Backed Securities, pocketing the mark-ups as undisclosed commissions. According to the Commission, the bank failed to reasonably supervise its employees and to implement measures to prevent and detect the fraud. SEC